New York Adopts Tipped Worker and Fast Food Worker Minimum Wage Regulations

December 23, 2015

By Andrew D. Bobrek
As we reported previously, the New York State Department of Labor (“NYSDOL”) proposed a series of new regulations earlier this year.  These proposals included new regulations raising the minimum wage and reducing the maximum available “tip credit” for certain workers in the hospitality industry, and new regulations implementing the recommendation of Governor Cuomo’s Fast Food Wage Board to raise the minimum wage for fast food workers to $15.00 per hour.  Today, both sets of regulations were formally adopted and published in the New York State Register. These new regulations are effective on December 31, 2015, and contain no changes from what NYSDOL originally proposed earlier this year. For more information about these regulations, readers can access our prior blog article.  Among other things, as of December 31, 2015, certain tipped workers who fall under New York’s Hospitality Industry Wage Order must be paid at least $7.50 per hour and may only receive a maximum “tip credit” of $1.50 per hour.  Also, as of this same date, covered fast food workers must be paid at least $9.75 per hour if they are employed outside of New York City or at least $10.50 per hour if they are employed inside of New York City.  These minimum wages for covered fast food workers are set to automatically increase annually, eventually reaching $15.00 per hour on December 31, 2018 in New York City and on July 1, 2021 in all other areas of New York. There may be legal challenges to these recently-adopted regulations, in particular the regulations impacting employers in the fast food industry.  We will continue to report any noteworthy developments here.

The Division of Human Rights Proposes Regulations to Expand Anti-Discrimination Protections to Transgender Individuals

December 23, 2015

By Christa Richer Cook
After several unsuccessful attempts to pass the Gender Expression Nondiscrimination Act, which would have extended the nondiscrimination protections in the New York Human Rights Law to transgender individuals, Governor Cuomo took the unprecedented step of directing the New York State Division of Human Rights to issue regulations that would protect transgender applicants and employees in New York. The proposed regulations, which were published in the New York State Register on November 4, 2015, make discrimination and harassment on the basis of gender identity or the status of being transgender a form of sex discrimination prohibited under state law.  The proposed regulations would also make “gender dysphoria” a protected disability under state law, prohibit harassment on the basis of one’s gender dysphoria, and obligate employers to provide accommodations to employees diagnosed with gender dysphoria.  The regulations define “gender dysphoria” as a “recognized medical condition related to an individual having a gender identity different from the sex assigned to him or her at birth.” The 45-day comment period recently ended, which clears the way for the Division of Human Rights to adopt the regulations.  However, it is anticipated that the Division will wait until early 2016 to begin enforcing the Human Rights Law with respect to transgender applicants and employees.  The anti-discrimination statute in New York City and several other city ordinances already extend protection to transgender individuals.  In addition, earlier this year, the Department of Justice and the EEOC began interpreting the sex discrimination prohibition in Title VII of the Civil Rights Act to cover discrimination against transgender individuals.  The Office of Federal Contract Compliance Programs also issued a final rule prohibiting federal contractors from discriminating against employees or applicants based on their sexual orientation or gender identity. A great deal of litigation is likely to occur in this area in the upcoming year, not only to challenge the application of the various federal and state laws to transgender individuals, but also to address complex and sensitive issues including how employers will need to handle issues of confidentiality, employee benefits, accommodations for restroom access, and other issues that might arise for employees transitioning from one gender to another.  Employers would be well-advised to begin to review their employee handbooks and other employment policies and practices to prepare for these expanded protections for transgender employees and applicants.

Lloyd Dobler's View of Job Responsibilities Can't Defeat Garcetti Defense

December 8, 2015

By Howard M. Miller

In the classic 1980's comedy "Say Anything," the iconic high school senior Lloyd Dobler articulates his career goals as follows: "I don't want to sell anything, buy anything, or process anything as a career.  I don't want to sell anything bought or processed, or buy anything sold or processed, or process anything sold, bought, or processed, or repair anything sold, bought, or processed.  You know, as a career, I don't want to do that." A cursory Google search reveals that this 25 year old quote still resonates with much affection.  But what may be deemed a charming lack of ambition from a teenaged movie character can be the death knell of a First Amendment case brought by a plaintiff who turns this quote into a veritable workplace mantra. Take for example the recent case of Alves v. Board of Regents of the University System of Georgia.  In Alves, five psychologists of the Georgia State University Counseling Center submitted a written memorandum to the Counseling Center's director and the director's supervisor, criticizing the director's leadership and management, which they claimed "created an unstable work environment" and prevented the staff from being effective in their work.  The memorandum set forth five areas of concern, including deficiencies in management, witness tampering, and selective treatment of staff based on race. A short time later, the director implemented a reduction in force affecting all the staff psychologists, all but one of whom were signatories to the memorandum, and outsourced their services at allegedly lower costs.  The five psychologists who had signed the memorandum filed a First Amendment retaliation suit, claiming that they were fired for the "speech" contained in the memorandum, which they contended was made by them as ordinary citizens on matters of public concern. The defendants moved for summary judgment dismissing the complaint, arguing that under the Supreme Court's decision in Garcetti v. Ceballos, the memorandum was written about matters of only personal interest pursuant to the plaintiffs' official duties as employees, rather than about matters of public concern.  The lower court agreed with the defendants and dismissed the complaint, which resulted in an appeal to the Eleventh Circuit Court of Appeals. On appeal, the five psychologists employed a Dobleresque view of their job responsibilities, arguing that raising ethical issues and protesting alleged supervisory incompetence were simply not within the ordinary ambit of their job duties.  In other words, according to the plaintiffs, their job was only to provide counseling services to students -- not to "process" or "repair" anything within the broader universe of their workplace.  The Eleventh Circuit disagreed and affirmed the dismissal of the plaintiffs' complaint.  The Court found that the plaintiffs' protests were in furtherance of their ability to perform their job responsibilities with the goal of ending perceived mismanagement.  The Court determined that these were matters of personal interest rather than public concern, and therefore, were not protected by the First Amendment. The long and short of Alves and the cases that follow similar reasoning is that while a public employee may say anything in a lawsuit to try to limit their true job responsibilities, lack of ambition, whether real or feigned, is rewarded with applause only in the movies.

Issues to Consider When Using Biometric Scanners to Track Attendance

December 7, 2015

By Hilary L. Moreira
Many employers now track employee attendance by using biometric scanners that require an employee to clock in and out by scanning a fingerprint or a palmprint.  Such scanners have largely replaced paper timesheets and have made managing employee attendance more accurate and efficient.  However, employees sometimes express privacy concerns when asked to provide such data.  Many employees are concerned about what an employer may do with the gathered information or whether the information could be hacked by an outside individual. Recently, an employee was awarded a judgment of $586,860 (including back pay, front pay, and compensatory damages) after his employer forced him to retire due to his refusal to use the biometric hand scanner that the company installed to track attendance.  The employee, who was an Evangelical Christian, had informed his employer that using the hand scanner violated his sincerely held religious beliefs because it could potentially be used to create an identifier for followers of the antichrist known as “The Mark of the Beast.”  While this is an extreme example, many employees have expressed fears that their biometric data may be improperly used in the future. New York employers should be aware that New York State has one of the few statutes that limits the collection of biometric data.  New York Labor Law Section 201-a prohibits employers from requiring the fingerprinting of employees as a condition of obtaining or continuing employment.  There are limited exceptions to this restriction.  For example, the New York State Department of Labor has taken the position that voluntary fingerprinting is permissible.  Additionally, Section 201-a does not apply to state or municipal employees, workers at medical institutions, many school employees, or to other employees who are subject to fingerprinting by law or regulation.  Aside from these exceptions, however, many New York employers may be limited to the use of hand scanners or the more expensive iris scanning equipment, rather than a device that requires an employee’s fingerprint. As an alternative to biometric scanners that require an employee’s fingerprint, some employers have installed devices that use a finger geometry “scan” rather than an actual “fingerprint.”  This technology scans a user’s finger and identifies an individual’s finger “geometry” by measuring its length, width, thickness, and surface area, and disregards surface details, such as fingerprints, lines, and scars.  Those measurements are often converted into a mathematical algorithm that are then stored in the attendance scanners.  Because a fingerprint is not taken, Section 201-a is not implicated.  Once employees understand that their actual fingerprints are not being taken or kept by their employers, their privacy concerns generally dissipate. In addition to potential Section 201-a issues, employers should also be aware that they may have a duty to bargain with a union before requiring the use of such biometric devices pursuant to the National Labor Relations Act or the Taylor Law. Employers who are considering implementing a biometric scanner system to track attendance should:  (1) communicate with employees prior to introducing the biometric system, so that all employees will understand exactly how the technology is used; and (2) distribute a clear employer policy.  Often, employee privacy concerns are based on misinformation that can be alleviated by taking these two simple steps.

Start Preparing Now for Wage and Hour Changes on the Horizon

November 17, 2015

By Katherine R. Schafer
As we have previously reported on this blog, and as most of you are well aware, the U.S. Department of Labor has published its highly-anticipated proposed revisions to the “white collar” exemptions under the Fair Labor Standards Act (“FLSA”).  The proposed rule would increase the required salary level for exempt employees to a projected $50,440 per year in 2016 and establish a procedure for automatically updating the minimum salary levels on an annual basis going forward without further rulemaking.  The proposed rule also significantly increases the salary threshold to qualify for the “highly compensated employee” exemption to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually).  According to the USDOL, nearly 5 million employees currently classified as exempt will immediately become eligible for overtime pay should the proposed rule be adopted as the final rule. Current best estimates are that we could see the final rule published next year.  In the meantime, there are steps employers can take now to start preparing for compliance, beginning with identifying those current exempt positions with salaries that would fall below the Department’s proposed $50,440 per year (or $970 per week) threshold or the increased salary threshold for highly compensated employees.  These employees will either need to receive a bump in salary to put them over the minimum threshold or be reclassified as non-exempt.  For those likely to be reclassified, employers should start trying to estimate future compensation costs by looking at how many hours per week these employees are currently working. Employers should also start thinking about whether they will need to hire additional full-time, part-time or seasonal employees or whether they will need to compensate newly reclassified employees at a lower hourly rate (as compared to their current weekly salary divided by 40) to offset the potential increase in overtime costs.  In determining hourly rates for newly reclassified employees, keep in mind that the minimum wage in New York increases to $9.00 on December 31, 2015.  In the Hospitality Industry, tipped workers and fast food workers in New York may also be in line for wage rate increases on December 31, 2015, pursuant to proposed regulations issued by the New York State Department of Labor. Finally, employers should start thinking about how these changes will be communicated to their employees.  An effective communications strategy will be an important part of managing the uncertainty and anxiety surrounding the potential reclassification of an unprecedented number of positions in the workplace.

EEOC Has Attendance Point Systems in its Sights

November 13, 2015

By John M. Bagyi
Attendance point systems undoubtedly have appeal.  These policies -- often referred to as "no fault attendance policies" because they assign points to absences regardless of the cause -- take the subjectivity out of attendance-related corrective action.  However,  to be legally compliant, an attendance point system must make allowances for legally protected absences. You may be thinking -- "how could this be discrimination?  We're treating disabled employees the same as all other employees."  Well, the ADA requires you to not only treat qualified individuals with disabilities the same as you would nondisabled employees, it also requires that you provide reasonable accommodations -- modifications or adjustments to the way things usually are done that enable a qualified individual with a disability to enjoy an equal employment opportunity.  Among the possible accommodations envisioned by the EEOC?  Modifying or changing policies. Not surprisingly, the EEOC now has employers with attendance point systems in its sights.  In fact, the EEOC has brought legal action against a number of employers who maintain attendance point systems that fail to except out legally protected absences. By way of example, last week, the EEOC announced a $1.7 million settlement with Pactiv LLC, an Illinois-based employer.  According to the EEOC, Pactiv maintained policies under which attendance points were issued for medical-related absences.  In addition to paying $1.7 million, Pactiv also agreed to revise and distribute a new attendance policy that will not assess points for disability-related absences.  As noted by the EEOC District Director -- "Employers need to get this message:  Inflexible, strictly enforced leave policies can violate federal law. . . .  As an employer, make sure you have exceptions for people with disabilities and assess each situation individually." The takeaways?
  • Review your attendance policy to ensure it does not provide for the assignment of points (or corrective action) when an absence is legally protected.  If it does, work with labor and employment counsel to revise your policy to bring it into compliance.
  • Educate supervisors and others involved in the administration of your attendance policy.

OSHA Penalties Soon Getting a Boost

November 10, 2015

By Michael D. Billok

Michael Kinsley once said "A gaffe is when a politician tells the truth."  And one gaffe that has often been repeated is Speaker Pelosi's statement from 2010, saying about the Affordable Care Act, "we have to pass the bill so that you can find out what is in it."  There was great truth to that statement, as we are now in an age where the public only finds out what was contained in legislation after it has already been passed. Such as the new 144-page budget deal signed into law last week.  It was made public just before midnight on October 26, and with little debate, passed the House on October 28, the Senate on October 30, and was signed into law by the President on November 2.  And we are now coming to "find out what is in it." Such as a provision allowing OSHA to increase its penalties by up to 82%, to account for inflation since 1990.  OSHA's penalty amounts were previously fixed and not indexed to inflation.  However, the "Federal Civil Penalties Inflation Adjustment Act" tucked into the budget deal not only allows OSHA to begin increasing its penalties annually to account for inflation, but also allows it to implement a "catch up" increase for not raising its penalties for the past quarter century.  If OSHA elects to do so -- and as the sun rises in the east, OSHA will elect to do so -- it must implement an interim final rule by July 1 that will go into effect by August 1. OSHA's current maximum penalties are $7,000 (for other-than-serious and serious violations), and $70,000 (for repeat and willful violations).  Those amounts will likely increase to about $12,500 and $125,000 -- and then increase annually thereafter. For any employer subject to an inspection, whether due to a complaint, referral, emphasis program, or the site-specific-targeting program, the stakes are about to increase.

New Department of Homeland Security Regulation Aims to Preserve and Enhance STEM OPT Program for Nonimmigrant Students and U.S. Employers

November 9, 2015

By Joanna L. Silver
On October 19, 2015, the U.S. Department of Homeland Security (DHS) published a notice of proposed rulemaking in the Federal Register regarding optional practical training (OPT) extensions for F-1 students with U.S. degrees in science, technology, engineering or mathematics (STEM).  The proposed rule is essentially a response to an August 2015 decision of the U.S. District Court for the District of Columbia to vacate the present STEM OPT extension regulation for procedural deficiencies in its promulgation, effective February 12, 2016.  Under the proposed rule, the length of STEM OPT extension would be increased from 17 months to 24 months.  In addition, the rule requires employers to develop and implement mentoring and training programs to bolster students’ learning through practical experience and provides safeguards for U.S. workers seeking employment in related fields.  DHS is accepting comments on the proposed rule through November 18, 2015 and is making every effort to have the final rule take effect prior to the February 12, 2016 sunset of the present STEM OPT extension regulation. STEM OPT Extensions.  Under the proposed rule, the length of STEM OPT extensions would increase from 17 months to 24 months and F-1 students would be limited to two 24-month STEM OPT extensions (for example, one after earning U.S. master’s STEM degree and another after earning U.S. doctoral STEM degree).  The proposed rule extends the maximum period of unemployment for F-1 students to 150 days – 90 days during the initial 12-month period of post-completion OPT and 60 days during the 24-month STEM OPT extension.  If the DHS rule is implemented as proposed, the STEM OPT extension will be a benefit to F-1 students and U.S. employers alike, as students will be able to work in the U.S. for three full years before additional work authorization (e.g., H-1B, O-1, etc.) would be necessary, and employers will have a generous amount of time in which to assess F-1 employees’ performance before undertaking sponsorship for additional work authorization.  As with the present STEM OPT extension regulation, under the proposed rule, STEM OPT extensions are only available if the employer participates in the U.S. Citizenship and Immigration Services’ E-Verify employment eligibility verification program. New Employer ResponsibilitiesThe proposed rule establishes a couple of new responsibilities for employers seeking to employ F-1 nonimmigrants on the STEM OPT extension.  First, employers would be required to implement formal mentoring and training programs for STEM OPT students to enhance their practical skills.  The student would be required to prepare a Mentoring and Training Plan – including the training goals and a description of how those goals will be met -- with the employer and to submit the plan to the student’s designated school official (DSO) at his/her institution before the DSO could recommend and authorize a STEM OPT extension for the student.  Second, employers would be required to attest and provide assurances on a number of items including that they will not terminate, layoff or furlough a U.S. worker as a result of hiring an F-1 student on STEM OPT and that the duties, hours and compensation for the F-1 student employee are commensurate with similarly situated U.S. workers.  If an employer fails to comply with the new requirements, DSOs will be prohibited from recommending students for a STEM OPT extension. We will continue to monitor this proposed rule as the February 12, 2016 deadline approaches and provide updates so F-1 student employees and their employers can plan accordingly.

Recent Legislative and Regulatory Activity Will Impact the Payment of Wages in New York

November 6, 2015

By Andrew D. Bobrek
October saw a flurry of activity from workplace regulators in New York, and employers should take note of several recent legal developments. First, Governor Andrew Cuomo recently signed legislation extending a so-called “sunset” provision in prior amendments to New York’s wage deduction statute – Section 193 of the New York Labor Law.  Those amendments, enacted in 2012, broadened the scope of permissible wage deductions under state law, including deductions for certain overpayments and advances.  Absent legislative action, the amendments were set to expire this month, which would have caused Section 193 to revert to its prior, more restrictive form.  These amendments will now be extended for another 3-year period.  Notably, this recent legislative action serves to concurrently extend existing deduction-related regulations promulgated by the New York State Department of Labor (“NYSDOL”).  Among other things, the regulations set forth detailed requirements which employers must follow in order to lawfully deduct to recover overpayments and advances. Second, the NYSDOL proposed revised regulations on October 28, 2015, governing the payment of employee wages via payroll debit cards, direct deposit, and other means.  These revised regulations – which are not yet final or effective – would impose a number of new requirements regarding how employers pay their covered employees.  As we reported on this blog, the NYSDOL initially proposed regulations on this same subject earlier this year, which were open for an extended public comment period.  The recently-issued revised regulations contain several changes from what NYSDOL originally proposed, ostensibly in response to feedback it received during the prior public comment period.  On balance, the newly-revised version provides better clarity on certain requirements and may also render implementation of payroll debit card programs more feasible for employers.  As additional good news for employers, NYSDOL has indicated that there will be a six-month delay in the effective date once the revised regulations are adopted and published in final form.  The specific requirements proposed in the revised regulations can be accessed here, and are open for another 30-day public comment period. Third, the NYSDOL published proposed regulations on October 21, 2015, which would implement the recommendation of Governor Cuomo’s Fast Food Wage Board to raise the minimum wage for fast food workers to $15 per hour.  NYSDOL’s Commissioner subsequently adopted this recommendation, which will now proceed through New York’s rulemaking process.  The proposed regulations are presently open for a 45-day public comment period.  Businesses and their advocates in New York have opposed this drastic change and have questioned the NYSDOL’s authority to enact such an industry-specific raise without legislative action.  It is expected that there will continue to be considerable opposition to this proposal, that there will be significant public commentary provided through the rulemaking process, and that opponents will, if necessary, assert a legal challenge to the proposed change. And fourth, the NYSDOL has proposed additional regulations which would – effective on and after December 31, 2015 – raise the minimum wage and reduce the maximum available “tip credit” for certain workers who fall under the existing Hospitality Industry Wage Order.  Specifically, the proposed regulations would raise the applicable minimum wage for covered “service employees” and “food service workers” to $7.50 per hour (from $5.65 and $5.00, respectively).  Concurrently, the maximum available “tip credit” for these workers would be reduced to $1.50 per hour (from $3.35 and $4.00, respectively).  The proposed regulations also contain similar changes for covered “service employees” working in resort hotels, and would also include new language governing the calculation of hourly tip rates.  These proposed regulations are currently open for a 45-day public comment period, which began on October 7, 2015. As a reminder, the NYSDOL proposed regulations referenced above remain pending and are not yet effective.  There is no specific timetable for further action on the part of NYSDOL.  Even so, it is conceivable that the regulations will be issued in final form and adopted at or near the end of this year.

Stronger New York Pay Equity Law to Take Effect in January 2016

October 29, 2015

New York employers take notice:  an amendment to New York’s equal pay law (S.1/A.6075) was signed by Governor Cuomo on October 21, 2015.  The law amends Labor Law Section 194, which prohibits pay differentials based on gender in jobs requiring “equal skill, effort and responsibility” which are “performed under similar working conditions.”  The bill was passed by the Assembly in April, and by the Senate in January, and the changes are significant. The amendment to Labor Law Section 194 is one of eight laws aimed at gender equality issues that Cuomo signed last week.  Of interest to employers, several of the other laws also touch on employment issues.  Those other laws:
  • Extend the prohibition on sexual harassment to all employers, including those with less than four employees (S.2 / A.5360);
  • Allow employees to obtain attorneys’ fees when they prevail in sex discrimination lawsuits (S.3 / A.7189);
  • Add “familial status” to the list of protected traits under the New York State Human Rights Law (S.4 / A.7317); and
  • Add a requirement to the Human Rights Law that employers must provide reasonable accommodations to all pregnant employees, not just those with a pregnancy-related disability (S.8 / A.4272).
The laws are slated to take effect on Tuesday, January 19, 2016. The premise of the pay equity amendment is simple and appealing:  the same day’s pay for the same day’s work.  At first glance, this is not big news.  The state labor law and federal law already require equal pay without regard to gender.  However, this law tightens and strengthens Section 194 in ways that will undoubtedly impact many New York workplaces. First, under existing law, an employer can defend a pay discrimination claim by showing that the difference in pay is justified by a seniority system, a merit system, a system measuring earnings based on quantity or quality of work, or “any other factor other than sex.”  This catch-all was viewed by many as a loophole and hindered the success of many pay discrimination claims.  The new law replaces the “any other” defense with the following:  "a bona fide factor other than sex, such as education, training, or experience."  This bona fide factor must be job-related and consistent with business necessity.  Notably, the burden is on the employer to prove the existence of this bona fide factor; it is not on the complaining employee to prove discriminatory motive (as in other types of employment discrimination litigation). As any employer can attest, many factors other than sex go into compensation decisions.  Under the old law (and still under federal law), these other factors typically held up to the test of “any other factor other than sex.”  It is not clear which factors will hold up under the new law.  For example, are market forces still a defense?  In a competitive market for talent, an employer might pay a new hire more than employees currently performing the same job simply because the market demands it.  Perhaps the candidate has an offer from a competitor that the employer must match to attract the candidate.  Often, internal compensation lags behind external market.  Whether market forces will be considered “a bona fide factor other than sex, such as education, training, or experience” remains to be seen. Moreover, even if an employer establishes a “bona fide factor” to justify a gender pay difference, an employee can still prevail under the new law by showing that:  (a) the bona fide factor has a disparate impact on one sex; (b) alternative employment practices exist that would serve the same business purpose and not produce the pay differential; and (c) the employer refused to adopt the alternative practice.  The lack of clarity over what will be considered a “bona fide factor” will undoubtedly result in a wave of litigation. Second, the Pay Equity Act gives employees the right to openly inquire about, disclose and discuss their wages.  Employers cannot prohibit these conversations.  Rather, the employer may only establish and distribute a written policy containing “reasonable workplace and workday limitations on the time, place and manner” for pay discussions.  The law states that an example of a reasonable limitation would be a rule that an employee may not disclose a co-worker’s pay without the co-worker’s permission.  The law contains some recognition that certain employees must still maintain confidentiality of pay information:  an employer may prohibit an employee with access to other employees’ pay information as part of their job from disseminating that information to others who do not have the same access. This right to openly discuss pay is new to New York law, but it is consistent with the National Labor Relations Board’s position that an employee’s right to openly discuss wages is protected by the National Labor Relations Act. Third, the law contains dramatically higher penalties than other state employment discrimination and wage/hour laws.  Employers who are found to have willfully violated the Equal Pay Act are subject to liquidated damages in the amount of 300% of the wages owed.  In other words, in addition to making the employee whole for any unlawful difference in pay, there is an additional potential penalty of three times those wages.  Other provisions of the New York Labor Law provide for liquidated damages of “only” 100%. As stated above, the law takes effect on January 19, 2016.  Therefore, employers should act quickly to evaluate any potential exposure.  Now is the time to review pay rates to ensure any gender differences can be justified based on the factors in the statute.  Consider whether these factors are job-related and consistent with business necessity.  Additionally, employers should review their written policies, particularly confidentiality policies, to ensure they do not contain restrictions on the right to share or discuss compensation information, and revise as necessary.  Similarly, supervisors should be made aware that they may not prohibit conversations about pay.  Finally, consider the pros and cons of adopting a new policy setting reasonable limits on the time, place and manner of pay discussions.

Pending Supreme Court Case Could Affect Collection of Public Employee Union Agency Shop Fees

October 16, 2015

By Subhash Viswanathan
Recently, the United States Supreme Court commenced a new session with a docket full of interesting cases.  One case, Friedrichs v. California Teachers Association, is of particular significance to those in the field of public sector labor law.  A decision in favor of the plaintiffs has the potential to affect the implementation and regulation of union agency shop fees nationwide. The case was originally brought by a California public school teacher, Rebecca Friedrichs, who argued that the mandatory payment of agency shop fees violated her First Amendment right to free association and free speech.  Currently, public sector employees in New York who choose not to join the union that has been certified as their collective bargaining representative are required under the Taylor Law to pay fees associated with the union’s collective bargaining and contract administration costs.  These fees are called “agency shop fees.” Agency shop fees may not include any political costs associated with running the union.  However, the plaintiffs in Friedrichs argue that it is difficult to separate the political costs associated with public employee unions from the collective bargaining and contract administration costs.  In their Petition for a Writ of Certiorari to the Supreme Court, the plaintiffs wrote:  “In this era of broken municipal budgets and a national crisis in public education, it is difficult to imagine more politically charged issues than how much money cash-strapped local governments should devote to public employees . . . .” Similar to the issues presented in some of the other cases on the docket this session, the issue of agency shop fees in the public sector has recently been before the Supreme Court.  In the 2014 case of Harris v. Quinn, the Court addressed the issue of whether the First Amendment prohibits the collection of agency shop fees from Rehabilitation Program Personal Assistants employed by the State of Illinois who choose not to join or support the union.  The facts in Harris led to a narrow opinion by the Court that the First Amendment rights of the Personal Assistants would be violated by the collection of agency shop fees because the customers (recipients of home care services), rather than the State of Illinois, controlled most aspects of the employment relationship and the scope of the collective bargaining provided by the union on behalf of the Personal Assistants was extremely limited.  The Court also noted that the traditional “free-rider” argument that had previously supported agency shop fees in the past was weakening in light of First Amendment scrutiny. The defendants in Harris and in Friedrichs both rely on the Supreme Court’s 1977 decision in Abood v. Detroit Board of Education.  In Abood, the Supreme Court held that although it was unconstitutional to collect fees from non-member employees to support political or ideological causes, unions have the right to require employees within the bargaining unit who choose not to become union members to contribute to the cost of collective bargaining activities.  Notably, unions are also required to provide some sort of notice to all members of the bargaining unit as to what the fees are being used for, in an effort to allow time for any objections by non-member employees to their agency shop fees being contributed to political causes. What does this mean for public sector employers in New York?  The plaintiffs in Friedrichs are seeking to overrule the precedent set in Abood by either abolishing agency shop fees, or, in the alternative, by creating a system whereby non-member employees must opt in (rather than opt out) of the payment of such fees.  Section 208.3 of the Taylor Law provides that each public employee union in New York is entitled to have deducted from the wage or salary of non-member employees within the bargaining unit the amount equivalent to the dues levied by the union against member employees.  Section 208.3 also requires, as a condition of this agency shop fee deduction, that the union must establish and maintain “a procedure providing for the refund for any employee demanding the return of any part of an agency shop fee deduction which represents the employee’s pro rata share of expenditures by the organization in aid of activities or causes of a political or ideological nature only incidentally related to terms and conditions of employment.”  If the Supreme Court rules in favor of the plaintiffs, the constitutionality of this provision of the Taylor Law could also be subject to challenge. In the meantime, stay tuned for further developments regarding this case, and be on the lookout for oral arguments in the next few months.

Employee's "Trick" Results in a Halloween Bag of Rocks From the Jury

October 14, 2015

By Howard M. Miller

In prior blog articles, we've sought wisdom from Sun Tzu, an audit of Santa's Workshop, a theoretical application of the faithless servant doctrine to A-Rod, and Pooh Corner for some Zen advice on day-to-day employment matters.  Our next stop on the Employment Law Express is a seasonal walk through the Pumpkin Patch with the Peanuts gang. As only he could, Linus explained the criteria for a visit from the Great Pumpkin: Each year, the Great Pumpkin rises out of the pumpkin patch that he thinks is the most sincere.  He's gotta pick this one. . . .  You can look all around and there's not a sign of hypocrisy. Alas, like other astute philosophers of historical significance, Linus is likely keenly aware that the importance of sincerity is not limited to the pumpkin patch, but has broad application, even reaching into the black box of the jury room in an employment discrimination case.  For those plaintiffs hoping for a bag of treats from the Great Pumpkin (in the form of cash), they need to be mindful for signs of hypocrisy -- a lesson painfully learned by the plaintiff in Housley v. Spirit Aerosystems, Inc., which was just recently decided by the Tenth Circuit Court of Appeals on October 9, 2015. The plaintiff was a Boeing employee who was not hired by Spirit Aerosystems when Spirit acquired the facilities where she worked.  She sued for age discrimination, hoping to lure a bounty of treats from the proverbial Great Pumpkin (a federal jury, to be precise), in part by relying on secretly recorded conversations with her supervisors during which she was asked if she was old enough to retire.  On the surface, the plaintiff had found a perfect patch from which to receive her treats (i.e., "He's gotta pick this one" -- just listen to the tape).  But, was the patch sincere and free of hypocrisy?  The jury thought not, and rendered a verdict in favor of Spirit.  During the trial, Spirit exposed the plaintiff's hypocrisy by using the fact that she had secretly recorded conversations with her supervisors as after-acquired evidence of wrongdoing that negated any alleged damages. On appeal, the Tenth Circuit refused to find that the lower court committed any reversible error in allowing Spirit to use the recordings for this purpose.  In sage, Linusesque prose, the Court reasoned:  "The recordings in this case turned out to be a double-edged sword.  Housley wanted the jury to know about them for obvious reasons and considering her active promotion of their admission she is not now in a position to complain about getting what she wanted.  Spirit turned the tables on her by promoting their use for a different, albeit limited, purpose -- after-acquired evidence of wrongdoing.  In the end Housley was obliged to take the bitter with the sweet." Halloween, like a suit for employment discrimination, is goal-oriented -- a pursuit in reaching for "the sweet."  Sometimes this goal seems easily obtainable, as noted by the Peanuts characters: Lucy:  All you have to do is walk up to a house, ring the doorbell, and say "tricks or treats." Sally:  Are you sure it's legal? Yes, in many jurisdictions (including New York), secretly recording a supervisor in a conversation to which the employee is a party is just as legal as knocking on a door and asking for candy.  And, on the surface, the recording (depending on its content) should result in the receipt of treats with no more effort than knocking on a door.  But not everyone gets a treat.  Tricksters may find themselves walking away with nothing but a bag of rocks. So, the lesson for this Halloween season is that employers defending against employment discrimination claims, like Spirit, should always be on the lookout for a smoking gun that, on closer inspection, is nothing more than a Halloween prop ready to backfire if just given enough room to do so.